Avana Global FZCO Vs DCIT (ITAT Mumbai)
Shipping & Inland Haulage Income Covered by Article 8 of India–UAE DTAA- Revenue’s 44B Stand Rejected
ITAT Mumbai allowed the assessee’s appeal by holding that freight income & inland haulage charges earned from operation of ships in international traffic were covered under Article 8 of the India–UAE DTAA & hence not taxable in India
Assessee, incorporated & tax resident in UAE, was engaged in the business of operating ships in international traffic. During AY 2022-23, it earned freight income of Rs.581.11 crore (including inland haulage charges of Rs.20.37 crore) which it claimed as exempt under Article 8 of the treaty. AO denied treaty benefit, invoking section 44B & treating Rs.43.58 crore (7.5% of freight) as taxable income. DRP upheld AO’s stand by relying on its earlier directions.
Before ITAT, assessee argued that in its own cases for AYs 2016-17, 2017-18, 2018-19 & 2021-22, identical issues were decided in its favour by coordinate benches, which had extended Article 8 benefit to both freight receipts & inland haulage charges. Tribunal noted that the jurisdictional Bombay High Court in Balaji Shipping (UK) Ltd. & Safmarine Container Lines NV had already settled the law in favour of taxpayers. It emphasized that inland haulage charges are inextricably linked to international shipping activity & cannot be segregated for taxation.
